China’s economic inequality is worse than America’s. And the pandemic hasn’t helped.

In March, a Chinese migrant worker, identified by the pseudonym Afen, arrived in Shanghai with hopes of landing a job. Her journey was not unusual; millions of rural Chinese travel to the country’s large cities every year, looking for work. Migrant labor has been a key engine for the economy for decades.

But Afen arrived just as Shanghai was shutting down amid a covid outbreak, and instead of a job, she landed in a shelter and soon after tested positive for the coronavirus. That positive test — in a nation famously pursuing a “zero-covid” policy — became a black mark on her record. She tried to find a job after she left quarantine, but time and again she encountered job listings that disqualified people with a history of covid. Within a few weeks, Afen was out of money. She ended up living out of a public restroom in Shanghai’s main train station.

China’s rich-poor divide is all the more stark given repeated pledges by its leaders to make reducing income inequality a core goal.

Last summer, President Xi Jinping launched a campaign under the banner of “common prosperity,” a national strategy to lift the poor and crack down on powerful industries — the country’s booming high-tech sector in particular. “Common prosperity” was more than a slogan; it informed the direction of the Communist Party’s plans for 2022 and beyond, and for a time, Xi repeated those two words in nearly every major address.

One year later, the lofty rhetoric of “common prosperity” has faded into the background, and the data and facts on the ground suggest that income inequality in China is only growing.

“‘Common prosperity’ has now been moved aside as the economy has faltered, as covid swirled up, and you don’t hear very much about it,” Scott Rozelle, an economist at Stanford University who studies rural development in China, told Grid. “It’s like climate policy in the U.S. once gas prices rose.”

Now, with the common prosperity agenda sidelined and the economy struggling amid unending covid lockdowns, China’s rich-poor divide may deepen. And in the years ahead, inequality could pose a major challenge to China’s development and a key test for Xi and the party.

Inequality in China — what the data shows

Even before the pandemic, China was hardly an ideal of communist equality; still, the extent of the wealth and income gaps in China in recent years is striking.

Economic inequality can be measured in different ways. A common approach is what’s known as the Gini coefficient, which assesses the distribution of income in a country — with 0 representing equality and 1 being the worst possible grade.

The rich-poor gap in China is even greater when looking at overall wealth — which includes not just income but all assets such as stocks, bonds and property. When these are factored in, the World Inequality Lab found that the richest 10 percent of China’s population owns nearly 70 percent of total household wealth.

How the lockdowns have deepened inequality

Based on preliminary data, and stories like Afen’s, it appears that the recent slew of lockdowns have made China’s inequality problem worse.

Research conducted at the beginning of the pandemic showed that covid restrictions were eating into rural paychecks. According to surveys conducted by Stanford researchers across rural villages in 2020, nearly three-quarters of respondents said that people who typically worked outside the village were unable to do so because of pandemic controls. More than 90 percent said covid controls had decreased their income. And over the past six months, such restrictions on movement have been reinstated.

Will inequality become an “active volcano”?

High levels of inequality aren’t a new phenomenon in China. The rich-poor gap traces back to Deng Xiaoping’s economic reforms in 1978. Deng’s push to open China’s economy and encourage growth saw the economic boom arrive first in coastal cities, while inland and rural areas lagged. That created a sharp divide in wealth.

For decades, though China’s inequality was increasingly apparent to all, the country’s surging economy blunted the feeling.

“This was a situation where almost everybody was getting richer, but some people were getting richer faster than others,” said Terry Sicular, an economist at the University of Western Ontario who focuses on China. That “all boats are rising” feeling made the inequality more acceptable and less politically problematic, she said.

Inequality had appeared to plateau in the years after 2008 as China’s working-age population started to decline, leading to a tighter labor market and a rise in lower-class wages. But with factories shifting overseas in recent years and the pandemic’s economic blows, the inequality problem has been on a steady rise and may increasingly be on people’s radar.

Rozelle said he has seen a shift in how people think about their future: “I see it totally when we go to villages. The young rural people say, ‘What am I going to be doing 10 years from now?’ They’re worried about it for the first time.”

That poses major questions for the government. “Growth is slowing, and the regime can’t continue to provide the benefits of growth — or promise the benefits of growth, and there will be more trade-offs among different groups in society,” said Sicular. “So what’s the basis of its legitimacy now?”

The future of “common prosperity”

The party has long been aware that with growth slowing, policies would need to more explicitly focus on the country’s poor. Back in the early 2000s, for instance, the country expanded its social welfare system to include rural medical insurance. And even before Xi’s “common prosperity” campaign, the party had spent years focusing on anti-corruption and poverty alleviation. In 2020, the government declared that extreme poverty had been eradicated in China.

But several experts now say that last year’s “common prosperity” reforms missed the mark in addressing inequality. The government encouraged China’s wealthiest entrepreneurs to give large chunks of money to charity, but these wealth transfers were one-offs. And the crackdowns on the tech and property sectors have contributed to the larger economic slowdown, which has in turn hurt the poor. Meanwhile, Sicular said that comprehensive measures to address inequality haven’t been rolled out.

He said that further investment in rural education and health are needed to propel China’s development in the coming decades and tackle inequality. Scholars have also long argued that the country’s hukou household registration system, which restricts the benefits people receive if they are born in a rural area and move to a city, is also ripe for reform.

For now, however, with the economy crawling at a 0.4 percent rate in the last quarter, the appetite for big government investments in social welfare isn’t strong. In the coming months, the immediate question is whether officials will loosen covid restrictions to reboot the economy. Then, assuming Xi secures a third term this fall, experts will be watching to see whether he doubles down on “common prosperity” — and expands its focus beyond cracking down on pockets of wealth. For now, prosperity feels increasingly out of reach for millions of people in China.